If you are a serious investor, you need to understand these different shades of Ethereum





If you are in the crypto You may have heard of “sat” for a while, short for satoshi, a tiny unit of bitcoin (BTC). Bitcoiners say they “stack the sat” when they buy bitcoins. Well, there is a version of that in Ethereum. It’s called gwei, a small unit of Ethereum that’s used when talking about gas fees, or network fees. But there are many other denominations beyond gwei, and indeed many tokens associated with ethereum (ETH).

Then there are quirks like wrapped ether (wETH), which represents the same value as ETH but is a technically different version of it. And there are tokens that represent staked ether deposits, like stETH.

If you can’t tell your gwei from your wei or your wETH from your ETH, you could be making a costly mistake. Millions of dollars are said to be locked on-chain, as many users of the Coinbase exchange attempt to deposit wETH to their Coinbase ETH addresses. In this guide, we explain everything to you.

What are gwei, wei and other Ethereum denominations?

Just as a US dollar can be broken down into 5 and 10 cent coins, Ethereum can also be denominated in smaller units. This may interest you: Crypto.com Announces MIT Fintech Sponsorship This Year.

The smallest denomination of ethereum is called wei. It is named after cryptographer Dai Wei, one of the first cryptographers to come up with b-currency, the predecessor to bitcoin, in the 1990s. One wei is worth one quintillionth of one ETH. In other words, one ETH is worth 1,000,000,000,000,000,000 wei.

All the other denominations refer to wei in their name, but you don’t really need to know most of the denominations because they are almost never used in any context. Let’s focus on the ones that matter.

Despite its seemingly infinitesimal value, the wei is important because it is a reference denomination sometimes used in smart contracts. In March 2022, an NFT (non-fungible token) investor lost $1 million when he listed an EtherRock NFT for 44 wei, instead of 44 ETH as he expected.

The most common denomination of all ETH is gwei, which stands for giga wei. A gwei is worth a billion wei. It is popular because Ethereum’s transaction fees, called gas fees, are calculated in gwei. Instead of saying that Ethereum’s base gas cost is 0.00000001 ETH, it’s easier to say 10 gwei.

Ethereum gas tracker (etherscan.io)

Other denominations are kwei (kilo wei) and mwei (million or mega wei). One kwei corresponds to one thousand (1,000) wei, and one mwei to one million (1,000,000) wei. They are almost never used in practice.

What is Wrapped Ethereum (wETH)?

Strange as it may seem, Ethereum’s native token, ether, does not conform to the most common blockchain token standard, known as ERC-20. Read also: Shiba Inu: SHIB price breaks out of a bearish chart and shows 24-hour gains.. The ERC-20 standard was proposed in 2015 and eventually became the standard for fungible tokens, like USD coin (USDC) and maker (MKR), in 2017.

Decentralized applications on Ethereum usually work with ERC-20 tokens. Since ETH is not ERC-20 by design, it needs to be made compatible. The process by which ETH is converted into an ERC-20 is called “wrapping”. Unboxing WETH means inverting the token back to its original state, good old ETH.

On most platforms, like the decentralized exchange Uniswap, ETH is automatically converted to wETH in the background. But others require you to pack the ETH yourself first. These include NFT marketplace OpenSea (where wETH is needed to make offers) and decentralized exchange aggregator CowSwap (where you’ll need to convert ETH to wETH before any trades).

wETH is exchangeable for ETH on a 1:1 basis at any time. You can wrap and unwrap ETH directly on decentralized exchanges or indirectly through the MetaMask browser extension. Remember that you will have to pay gas to pack and unpack your tokens.

What are stETH tokens and other staked ETH tokens?

To stake Ethereum, you will need 32 ETH. That’s a lot of ETH for just one person, which is why staking pools like Lido Finance allow users to combine their ETH and stake it with a validator. On the same subject : Nekoverse, Solana’s gaming project, presents the first-ever initial community contribution offering.. Centralized cryptocurrency exchanges like Binance also offer a similar service.

Total value of blocked liquid staking as of July 1, 2022 (Defi Llama)

When you stake ETH with a service like this, you receive tokens that represent your position in ETH. 1.5 stETH represents your initial deposit of 1.5 ETH.

Ether tokens and their issuers are as follows:

These tokens will be redeemable for ETH on a 1:1 basis after the merger, a key step in the Ethereum blockchain’s transition to proof-of-stake. However, the date of the merger has not yet been determined. In addition to the initial deposit, the tokens also represent a proportional share of the accumulated staking rewards, at an annual percentage rate of approximately 4%.

But these tokens are not necessarily exchangeable for ETH on a 1:1 basis before the merger, as their value is subject to natural market conditions, which we will see later.

Is stETH tied to the price of Ethereum?

Lido Finance’s stETH is the most popular token that represents staked ether deposits. Since inception, stETH has traded between 0.92 ETH and 1.05 ETH. Although it traded at around 1 per ETH for much of late 2021 and early 2022, stETH suffered a deeper discount in mid-2022, after large portfolios, such as that of hedge fund Three Arrows Capital, dumped their positions in stETH to increase liquidity.

The stETH/ETH conversion rate (CoinMarketCap)

The sell-off during the 2022 crypto crash caused the price of stETH to fall in proportion to that of ETH, leading some commentators to suggest that stETH might depreciate against ETH. However, stETH is not tied to ETH.

This is also true for other tokens that represent positions in ETH, such as BETH or aETHc.

Why is stETH trading at a lower price than Ethereum?

Although stETH is identical to ETH over the long term and also eligible for staking rewards, it is still trading at a lower price than the current price of ETH. This is mainly because the token is backed by time-locked ETH, a very inflexible underlying asset that is also subject to various risks.

Risks associated with stETH and the underlying ETH lock include:

Systemic risks (smart contract or validator).

The risk of executing the merger (further delays, cancellation or other technical issues).

However, one person’s risk is another person’s opportunity. For investors with a high risk appetite, stETH and other similar tokens represent an opportunity to buy ETH at a price below market price.

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Be vigilant and consult your financial adviser before making any investment decision. Mirror-Mag cannot be held responsible in the event of bad investments. Before using any third-party service, you should do your own research.

Thomas Estimbre
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